Health insurance comparison website, iSelect (ASX: ISU) has received a first strike against its executive pay.
Shareholders were obviously not amused that the company dropped its prospectus forecasts and didn't pay any dividends, yet the company paid its executives bonuses. The company has been beset by problems since listing. Shares have dived to trade at just $1.21, a 35% fall from the IPO price of $1.85, CEO Matt McCann quit in October, after the company missed its revenue forecast of $121.6 million by $3.6 million, and iSelect founder Damien Waller has been called to stand down.
Not only that, but major shareholder Spectrum Equity Investors sold most of its 8% stake unexpectedly on the company's first day of trading, and revenue for the full 2013 year has been lowered to $126.5 million.
An investigation by corporate teddy bear, the Australian Securities and Investments Commission (ASIC) let the company off the hook, saying it would not be taking further action over allegations that iSelect failed to meet its continuous disclosure obligations.
The Australian Shareholders Association (ASA) urged shareholders to vote against the remuneration report, and vote they did with 27.5% of shareholders rejecting the remuneration report. As more than 25% of shareholders voted against it, iSelect has received its first strike. Should it happen again next year, under 'second strike' rules the board must all re-stand for election, potentially triggering a board spill.
Compared to other recent IPOs such as Virtus Health (ASX: VRT), OzForex (ASX: OFX) and Freelancer.com (ASX: FLN), iSelect has been a disappointing IPO. Questions were raised over its revenue recognition accounting practices, as well as the company's whole business model. There are a multitude of websites offering similar services to iSelect, suggesting the company has no real competitive advantage.
Foolish takeaway
Foolish investors may want to steer clear of the company until the dust settles and iSelect can prove that it has a valid business model. So far, it's not looking good.